Brexit wins : Britain votes to leave European Union

Britain has voted to leave the European Union, with the "Leave" side securing around 52 per cent of the vote while "Remain" side has secured 48 per cent.

The historic decision will affect the British economy, immigration policy and shatter the stability of the continental unity forged by the European integration after World War II.

How UK became the member of Eueopean Union ?

The UK was not a signatory to the Treaty of Rome which created the European Economic Community (EEC) in 1957 after World War II. The United Kingdom applied to join the EEC in 1963 and again in 1967, but both applications were vetoed by the then President of France, Charles de Gaulle.

After de Gaulle relinquished the French presidency, UK made a third application for membership, which was successful. On 1 January 1973 the United Kingdom joined the EEC. This was done under the Conservative government of Edward Heath.

1975 Referendum :

The opposition Labour Party, led by Harold Wilson, contested the October 1974 general election with a commitment to renegotiate Britain's terms of membership of the EEC and then hold a referendum on whether to remain in the EEC on the new terms.

In 1975 the United Kingdom held a referendum on whether the UK should remain in the EEC. All of the major political parties and mainstream press supported continuing membership of the EEC. In line with the outcome of the vote, the United Kingdom remained a member of the EEC.

2016 Referendum :

In January 2013, Prime Minister David Cameron in his election campaign promised to hold referendum if he won the 2015 general election, in response to growing calls from his own Conservative MPs and the UK Independence Party (UKIP), who argued that Britain had not had a say in European Union since 1975, when it voted to stay in the EU in a referendum.

The Conservative Party won the 2015 general election and European Union Referendum Act 2015 was introduced into parliament to enable the referendum following which referendum was held on 23rd June 2016.

​Campaign groups :

There were two sides recognised by the Electoral Commission - In Campaign Ltd and Vote Leave Ltd the first campaigning to remain in the EU and the second to leave. Prime Minister David Cameron wanted Britain to stay in the EU.

Sixteen members of his cabinet were also backing staying in thus, Cameron and most of his ministers and Conservative MPs were on the ‘In’ side, so was Labour. About half of Conservative MPs, including five cabinet ministers, several Labour MPs and the DUP were in favour of leaving.

​Procedure for leaving the EU

Article 50 of the Treaty on European Union inserted by the Lisbon Treaty in 2007 "Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements."

Once Britain invokes Article 50, it will have a two-year window in which to negotiate a new treaty to replace the terms of EU membership.

Once a member state has notified the European Council of its intent to leave the EU, a negotiation period begins during which a leaving agreement is to be negotiated setting out the arrangements for the withdrawal and outlining the country's future relationship with the Union.

For the agreement to enter into force it needs to be approved by at least 72 percent of the continuing member states representing at least 65 percent of their population, and the consent of the European Parliament.

​The pros and cons of leaving the EU

Trade :

European Union with an estimated population of over 508 million is a single unified market in which no tariffs are imposed on imports and exports between member states so Britain has free access to one of the world's largest market.

Britain also benefits from trade deals between the EU and other world powers for example EU is currently negotiating with the US to create the world's biggest free trade area so that would have benifited UK but now Britain risks losing some of that negotiating power by leaving the EU.

Investment : Inward investment is likely to slow due to uncertainty of the outcome and its consequences. The pound slumped to the lowest level in 30 years, tumbling as much as 13 per cent. U.K. has seen similar situations before the Scottish independence referendum in 2014.

Sovereignty : Some Britons feel that leaving EU means victory of sovereignty as EU membership involves giving some control of their affairs to EU so UK sovereignty be absolute if the country withdrew from the EU.

Immigration :

Britons who are supporting UK to leave EU want Britain to take back full control of its borders and reduce the number of people coming here to live and/or work.They wants to put in place the same tough conditions for EU migrants as for people from India and other non-EU countries.

It should be noted that even Britons benefit from an equivalent right to live and work anywhere else in the EU. Currently about 1.2 million Brits living in other EU countries, while about 3 million non-British EU nationals live in Britain.

Jobs : Situation of Job depends on a complex interplay of trade, investment and immigration so leaving the EU would certainly impact the job scenario. About three million jobs could be lost by the exit of Britan from EU. Labour shortages in Britain could also hold back the economy.

Trigger a breakup of the UK : United Kingdom is made up of four countries England, Wales, Scotland, and Northern Ireland. If United Kingdom leaves EU through referendum, it may not stay united for very long. In 2014 Scotland voted to become an independent country.

Impact of Brexit on India

Companies like Tata Motors (JLR), Tata Steel Europe and Motherson Sumi which have huge exposure in Britain and in the European Union are expected to face falling sales, increased costs of operations and immigration barriers for its employees as the relationship between the UK and the EU is very relevant for such companies.

Companies which have taken loans in British currency will get a bonanza as Pound fell by almost 10% so they will now have to pay less when they are repaying loans however the investments from UK to India will also be expensive as it would get 10% less in Indian currency.

Foreign funds are likely to move out of the riskier markets like India. What is required in such a scenario is forex reserves. India's foreign exchange reserves hit a record high at $363.46 billion for the week ended 3 June.

Brexit will have a negative impact on the $108 billion Indian IT sector in the short term. The exact nature and extent of the impact will emerge over a longer period of two years or more.

Practice Questions

Q1

Which of these honour is not in the long list of awards that has been won by Pakistani teen activist Malala Yousufjai ?

India and Mozambique have signed three Memoranda of Understanding (MoU) on reduction of drug trafficking and psychotropic substances and related materials, cooperation in the field of youth affairs and sports, and long term agreement for purchase of pulses .

These MoUs were signed between Secretary of Economic Relations in the Ministry of External Affairs (MEA) Amar Sinha and Mozambique's Finance Minister in the presence of Prime Minister Narendra Modi and Filipe Nyusi, President of Mozambique.

Modi is the first Indian prime minister to visit Mozambique in 34 years. He will also visit South Africa, Tanzania and Kenya.

Long term agreement for purchase of pulses : India's commitment to buy pulses from Mozambique would help meet India's requirement. It will also facilitate long-term investments in commercial farming, generation of farm employment and raise farmers' incomes in Mozambique. India will encourage greater production of pulses in Mozambique with an assurance that it will be purchased by India at a mutually-agreed price.

Jul 07, 2016Govt nod to MoUs between India and Mozambique in the field of Drug demand reduction and prevention of illicit trafficking in narcotic drugs

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for signing of a Memorandum of Understanding (MoU) between India and Mozambique on Drug demand reduction and prevention of illicit trafficking in narcotic drugs, psychotropic substances and precursor chemicals and related matters.

The MoU is aimed to enhance mutual cooperation between the two countries in combating illicit trafficking in Narcotic drugs, Psychotropic substances and their precursors through exchange of information, expertise and capacity building.

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved a long-term contract by signing a Memorandum of Understanding (MoU) with Mozambique for import of pulses either through the private channels or Government-to-Government (G2G) sales through State Agencies nominated by the two countries.

Key Facts about the MoU :

The MoU aims at promoting the production of Pigeon Peas/Tur and other pulses in Mozambique by encouraging progressive increase in the trading of these pulses.

The MoU includes targets for exports of Tur and other pulses from Mozambique to India for five financial years and aims at doubling the trade from 100,000 tonnes in 2016-17 to 200,000 tonnes is 2020-21.

Background : The total availability of pulses including domestic production and imports were was less than domestic requirements putting pressure on the prices of pulses during the year 2015-16 and current year. To mitigate the shortfall in availability of pulses and supplement the existing efforts at meeting the requirements, the government has decided to enter into long term G2G arrangement with Mozambique.

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